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Advisers split on Turner’s call to overhaul fund manager bonuses

Advisers are divided on outgoing FSA chairman Lord Turner’s call for the asset management industry to overhaul fund managers’ bonuses in a bid to promote long-term investment.

At the launch of a new report by the G30 consultative group this week, Turner argued that national authorities should draft new best-practice guidelines to promote long-term horizons in portfolio management.

He said: “Portfolio managers’ bonuses could be conditional on their performance over a defined period. For senior managers, a minimum of three years.

“This would support the goal of making smart medium-term asset allocation decisions in the context of a long-term investment horizons.”

Hargreaves Lansdown head of research Mark Dampier welcomes Turner’s call as he wants to see the interests of the unit-holder and fund manager closely correlated.

He says: “Having a three to five year performance bonus makes more sense and stops people jumping jobs in the industry. Short-term performance incentives offer little benefit to the industry as any fund manager can have their day in the sun.”

But Skerritt Consultants head of investments Andy Merricks says: “You should reward a manager for a return that reflects the targets of a sector or fund. This more often than not is focused on a shorter period.”

Informed Choice managing director Martin Bamford says: “Remunerating fund managers can be difficult but I would say aside from ditching performance fees, there is not too much wrong with the existing model. Making them focus on the long term can impact short-term returns and visa-versa.”

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